I'm a financial journalist and author with experience as a lawyer, speaker and entrepreneur. As a senior editor at Forbes, I have covered the broad range of topics that affect boomers as they approach retirement age. That means everything from financial strategies and investment scams to working and living better as we get older. My most recent book is Estate Planning Smarts -- a guide for baby boomers and their parents. If you have story ideas or tips, please e-mail me at: deborah [at] estateplanningsmarts [dot] com. You can also follow me on Twitter

Yearend Tax Planning In Uncertain Times

Drastic tax reform may be in the forecast. Meanwhile take advantage of the favorable climate -- while it lasts. Credit: Athletics

This story appears in the Dec. 19 issue of Forbes Magazine.

With the collapse of Congress’ deficit-cutting Supercommittee, it’s a good bet that not much will be decided about taxes until after the 2012 elections. And then?

If Congress doesn’t act in a lame duck session, the Bush tax cuts will ­expire and on Jan. 1, 2013 the top tax rate will rise from 35% to 39.6% on salary, from 15% to 39.6% on corporate dividends and from 15% to 20% on long-term capital gains. At the same time a Medicare “surcharge” of 3.8% on investment earnings will kick in (on income above $250,000 per couple) and the current $5 million per-person exemption from the federal estate and gift tax will dip to $1 million.

After that, who knows? Congress might even take on tax reform, ­meaning rates could drop, while your deductions could be snatched away. In the face of such uncertainty it’s tough to plan. But there are still moves you can make to reduce your current tax bill and hedge your bets for 2013 and beyond.

Time deductions, but watch AMT

With 2011 and 2012 income tax rates constant, the old-fashioned advice to accelerate deductions into the current tax year and defer income until the following year should apply this December, says Mel Schwarz, director of tax legislative affairs at Grant Thornton in Washington.

That’s assuming, however, you’re not paying (or in danger of paying) the fiendishly complicated alternative minimum tax, which can turn that traditional advice on its head. For example, since state and local taxes aren’t deductible in AMT, you might delay the payment of your fourth-quarter state taxes until 2012—if you’re stuck in AMT this year but likely won’t be for 2012.

Warning: AMT planning usually requires help from a tax pro and is particularly tricky this December since an AMT “fix” that keeps 26 million middle-income families out of the AMT and reduces the AMT bill for millions more is set to expire at the end of 2011. (If history is any guide, Congress will eventually make that fix, retroactive to cover all of 2012.)

Stuff your retirement ­accounts

Fund retirement plans to the max for 2011 and 2012—both to reduce current taxes and to hedge against the possibility that tax reform might limit future contributions. For 2011 you can contribute up to $16,500 to a 401(k) plan, or $22,000 if you’re 50 or older. In 2012 the limits go to $17,000 and $22,500. These dollars can be put in a pretax 401(k), cutting your current tax bill.

Or if your employer offers the option and you believe tax rates will rise, put some of those dollars in a Roth 401(k). The money goes into a Roth after taxes, saving you nothing now. But the Roth grows tax free. You can withdraw from it tax free when you retire or before that if you leave the company, have had the account for at least five years and are 59 1/2 or older. All ­withdrawals by your heirs are also tax free.

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